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Frieden Company's contribution format income statement for last month is shown below: Sales (45,000 units) $ 1,800,000 Variable expenses 1,260,000 Contribution margin 540,000 Fixed expenses

Frieden Company's contribution format income statement for last month is shown below:

Sales (45,000 units) $ 1,800,000
Variable expenses 1,260,000
Contribution margin 540,000
Fixed expenses 432,000
Operating income $ 108,000

Competition is intense, and Frieden Companys profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability.

Required:

1. Friedens management is considering a major upgrade to the manufacturing equipment, which would result in fixed expenses increasing by $540,000 per month. However, variable expenses would decrease by $12 per unit. Selling price would not change. Prepare two contribution format income statements, one showing current operations and one showing how operations would appear if the upgrade is completed. Show an Amount column, a Per Unit column, and a Percentage column on each statement.

FRIEDEN COMPANY
Contribution Margin Income Statement
Present Proposed
Amount Per Unit % Amount Per Unit %
0 $0 0 0 $0 0
$0 $0

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